Home Disclosures and Material Facts What Should Sellers Disclose to Home Buyers?

By law, real estate agents
cannot fill out any sellers’ home disclosures unless the agent is the
seller or a party to the transaction. However, that doesn’t stop some
naive agents from completing disclosures on behalf of their clients and
opening themselves up for potential lawsuits. After all, it’s mostly
lawsuits that have prompted the creation of many of the disclosure
forms agents ask sellers to complete. If your agent can’t tell you, ask
a lawyer if you need to sign every disclosure handed you.

Federal Disclosures

Every state has its own laws regarding disclosures, so the forms will vary depending on where you live.

A federal disclosure such as Lead-Based Paint is
required for all transactions if the home was built before 1978. The
disclosure also gives the buyer 10-days to conduct inspections for
lead-based paint, unless that time period contingency is waived in
writing. It’s considered good practice, however, to give every buyer,
regardless of where she lives and regardless of the type of property she
is under contract to purchase, the disclosure regarding lead-based
paint. The potential for a lawsuit is too great to do otherwise.
Besides, even though it’s prohibited, there are still places where lead
paint is sold.

Material
Facts are commonly referred to as anything that would affect the
buyer’s decision to purchase or the price and terms the buyer offers.
In other words, if you have knowledge about a defect, it should be
disclosed. In California, sellers are to notify buyers if a death has
occurred on the property within the last 3 years. Some buyers are
creeped out by knowledge that a seller died in the house.

A
seller once asked me if she should tell the buyer that her husband
died in their bedroom five years ago. Although the law doesn’t require
it, because the death occurred outside of the three-year window and
because the buyer did not ask about it, I suggested she disclose this to
the buyers, and she did. Moreover, if she had chosen to withhold this
information from the buyer, I would have had to disclose it because now
I had knowledge of a material fact.

Causes of Death

Many
home buyers are fine with news of a death occurring in the house as
long as it wasn’t violent or gruesome. There are also buyers who
believe homes are haunted by former occupants who died in the house. If
you have specific details, you might want to consider sharing it with
the buyer unless it pertains to AIDS. Check with your local laws and a
real estate lawyer for advice about deaths surrounding AIDS because in
some states, AIDS falls into a protected class and could be subject to
discrimination claims as well. There are times you’re darned if you do
and darned if you don’t.

External Disclosures

Some states require disclosures about items that affect or could affect the property such as:

Earthquakes

Natural Hazards

Zoning Changes

Flood Zones

Fire Hazards

Noise Pollution

Ground Pollution

Air Pollution, among others.

Due
to the volume of lawsuits, the California Association of Realtors
publishes a number of disclosure forms for buyers, some of which tell a
buyer that if she purchases a home on a golf course, errant golf balls
might break her windows. Why? Because a homeowner who bought on a golf
course once sued for non-disclosure when golf balls smashed her picture
window.

Do You Need to Disclose Every Home Repair?

If
I were personally disclosing the condition of my own home to a buyer, I
would not use the term “repair,” because it could be deemed to imply
that the defect was permanently corrected. But if I had called a plumber
to fix a leak under the sink, I would disclose:

The pipes once leaked.

I paid ABC Plumbers $175 to stop the leak.

The pipes have not leaked since.

Are the pipes good as new? I don’t know. Probably not. I’m not going to guarantee it, however.

In lots of cases, home buyers feel a sense of relief if they know
certain things have been repaired. It brings a security to buyers if
they know a seller has:

Replaced a roof

Upgraded electrical & plumbing

Bolted the foundation

Foundation Problems

In areas with basements, this is a huge issue, as are problems surrounding wet basements.
But so are defective slabs. I represented a seller whose newer wood
floor showed discoloration in spots. Was it due to moisture? The sellers
didn’t know. We simply removed the rugs, disclosed the discoloration
to the buyer and offered a $5,000 credit for new floors, which the
buyers accepted without further discussion or fuss.

What About Rumors?

Generally
speaking, unless you will violate a state or local law by disclosing,
if you have knowledge of a defect or material fact, then disclose it.
If a neighbor repeated a rumor, and you have not verified nor disproved
the rumor, you might want to consider telling the buyer about the
rumor. Follow the Golden Rule. If you would like to know, your buyer
probably does as well. Typically, buyers aren’t upset by receipt of
negative information. They get upset and call a lawyer when they feel
they have been duped, deceived or lied to.